Thursday, August 23, 2007

Other measures of Los Angeles beach cities market activity, July 2007

Shorewood has published July numbers.

For the beach cities (El Segundo; Manhattan, Redondo, and Hermosa Beach), average days on market (DOM) has edged down to 39.

I am waiting for more Redondo Beach sales to show up in Zillow before I run calculations for July, but I have no reason to believe yet that true time on market for Redondo Beach has changed significantly from about 3 months (median) to 4 months (average).

For those of you unfamiliar with it, I use a homegrown measure of "supply strength" AKA "demand weakness" as a measure of market internals. It's simply a comparison of inventory to sales on any given month. It's an experimental measure to see if it is useful as a leading indicator of market health. My calculation shows a beach cities market "bottom" appearing May 2005 when supply was extremely tight. There was a peak in I-S/S October 2006 and then supply again started tightening more relative to sales. The ratio bottomed again March 2007 and has been crawling back up since.

For July, Shorewood reports inventory at 533 and sales at 143. Sales declined by over 16% YOY.

I-S/S bottomed around May 2005 but it wasn't until June 2006 that the median price peaked, suggesting a possible year lag before the stress from extra inventory started to have a visible impact on the market.

Median price bottomed December 2006 and then smoothly climbed back up again to a new high May 2007. (The line looks almost looks too smooth.) It is now down from that high. Let's see what happens. I hope we don't have to wait a year from the I-S/S bottom in March to see an impact on prices.

We must keep in mind that the more recent construction consists of bloat in the high end range, with no construction of anything new below 1600 square feet. It is clear that sales of higher-end homes for the affluent are keeping the market going.


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